The companion horse on the quarantined property near Wollongbar where one horse died from Hendra virus a fortnight ago has been euthanised after testing positive to the virus.
New South Wales chief veterinary officer Ian Roth said: "Results of laboratory tests yesterday revealed the surviving horse - which was showing signs of illness for more than 24 hours - was carrying the Hendra virus."
The horse, buried this morning, was the only other horse on the quarantined Wollongbar property, and there are no horses on neighbouring properties.
"It is believed that the horse became infected with Hendra following very close contact with the original infected horse.
There have now been three horses die from Hendra virus in the state in the past fortnight - two at Wollongbar and one near Macksville. Six horses have died in Queensland.
Roth said the first round of testing on the companion horse at Macksville had been completed and results were negative.
"There are three rounds of testing in total - the second and third rounds will take place over the coming month.
"Samples have also been collected from the two other low-risk horses on the property and the results are pending.
"All the horses are being regularly monitored and remain in good health."